Jett v. Lewis State Bank

• Decision Date: 03 May 1973
• Docket Number: No. Q--482,Q--482
• Citation: 277 So.2d 37
• Parties: Robert S. JETT, Jr., Appellant, v. The LEWIS STATE BANK, a Florida corporation, Appellee.
• Court: Florida District Court of Appeals

Page 37

277 So.2d 37

Robert S. JETT, Jr., Appellant, v. The LEWIS STATE BANK, a Florida corporation, Appellee.

No. Q--482.

District Court of Appeal of Florida, First District.

May 3, 1973.

Julius F. Parker, Jr., of Madigan, Parker, Gatlin, Truett & Swedmark, Tallahassee, for appellant.

John D. Buchanan, Jr., of Henderson, Richardson, Canada, Henry, Buchanan & Munroe, Tallahassee, for appellee.

JOHNSON Judge.

Appellant, plaintiff below, brought suit against the appellee bank seeking damages in the amount of $5,000.00 plus interest and costs. He now seeks review of an adverse final summary judgment rendered in favor of the Lewis State Bank, the appellee herein.

The facts in this case are not in dispute, and the issue turns solely upon a question of law; to wit: is a collecting bank liable to the drawer of a check when it deposits only a part of that check to the account of the named payee and cashes the remainder of the check upon instructions from the officers, directors and sole stockholders of the named payee?

Appellant wrote a personal check in the amount of $12,000.00 as a loan to a newly formed corporation called National Giant Portable Fun Slide, Inc., and said check was delivered to the three officers consisting of the president, the vice president, and the secretary-treasurer. These three officers, who were also the sole stockholders of the corporation, later appeared at the appellee bank for the purpose of opening a corporate checking account. They delivered to the appellee bank a resolution of the corporate board of directors, consisting of the officers and sole stockholders named above, which authorized funds to be withdrawn from the account only on checks signed by not less than two of the above corporate officers. During the same transaction, while all three corporate officers were present, the $12,000.00 check from appellant was presented to the bank with the request that only the sum of $7,000.00 be deposited in the corporate account and the sum of $5,000.00 be withheld and delivered in cash to one of the three corporate officers. The bank complied with this request, and the deposit slip issued by the bank reflects that only $7,000.00 was actually deposited to the corporate account and the remaining $5,000.00 was returned to and receipted for by the secretary-treasurer of the corporation, in the presence of the other two corporate officers participating in the transaction; and used for corporate purposes. Appearing on the reverse side of the check given by appellant to the corporation is an endorsement placed thereon by one of the bank's officers reading: 'For deposit only to account of within named payee'.

Soon thereafter, the corporation became defunct and appellant commenced proceedings against appellee charging the bank with having unlawfully disbursed corporate funds without proper authority to the damage of appellant. Both parties moved for a summary judgment in their favor. After considering argument of counsel, depositions and an affidavit filed by an officer of the appellee bank, the trial court found that the $5,000.00 in cash paid by the bank to one of the corporate officers at the time the account was opened constituted a payment to the corporation and this corporation had a right to receive the proceeds from the $12,000.00 check issued by appellant. Upon this finding, final summary judgment was rendered in favor of the bank and this appeal ensues.

It is our opinion that the final summary judgment entered below should be affirmed for several reasons. In the first instance, we feel that there was no justiciable question of fact that the money in dispute, the $5,000.00, was actually paid to the corporation, as found by the trial judge. The facts of this case disclose that all three officers of the corporation were present when the resolution was presented to the bank, the checking account was opened, signature cards were signed and the check in dispute was presented to the bank. There were no circumstances present which would have given the appellee bank notice of a possible diversion of funds from corporate purposes or put the bank on notice that the proceeds of the check were not going to the entity to which they were intended. In short, the appellant has failed to establish a loss, namely, that the proceeds were diverted from corporate use so as to prevent him from collecting his loan from the corporation.

There is a more cogent reason for affirmance in this case. Many cases from other jurisdictions have held, and we so adopt the rule, that the drawer or maker of a check has no right of direct action against banks, other than the drawee bank, which honor the check on a forged or unauthorized endorsement. The theory behind this rule is that, in an action for conversion against a collecting bank, the essential elements of conversion would be lacking in that the drawer does not have the right to immediate possession of the check because the beneficial ownership of the check is in the payee, not in the drawer. First National Bank v. North Jersey Trust Co., 18 N.J.Misc. 449, 14 A.2d 765 (1940).

In an action sounding in both contract, for moneys had and received, and in tort, for conversion, the drawer of a check has been denied recovery against the collecting bank upon the grounds that the collecting bank had no money in its hands which belonged to the drawer, that the drawer had no right in the proceeds of its own check payable to the payee, and that, not being a holder in due course or an agent for such holder, the drawer could not have presented its check to the drawee bank for payment. The value of the drawer's rights in the check is limited to the physical paper on which it is written and is not measured by its payable amount. The amounts a collecting bank receives from a drawee bank for the check cashed by the collecting bank are the drawee bank's funds and not those of the drawer; and whether the drawer is rightfully or wrongfully deprived of a credit is a matter between the drawer and the drawee bank. In short, the drawer's recourse is limited to an action against the drawee bank, for the only harm which befalls the drawer is the charging of its account by the drawee bank. Stone & Webster Engineering Corp. v. First National Bank & Trust Co., 345 Mass. 1, 184 N.E.2d 358 (1962).

It has also been held that a drawer of a check cannot recover against a collecting bank which honors a check bearing a faulty endorsement upon the contractual theory of warranty of prior endorsements. A guaranty of prior endorsements is only for the benefit of subsequent holders in due course, and not for the drawer of a check. There is no privity of contract between the drawer of a check and a collecting bank. Low v. Merchants National Bank & Trust Co. of Syracuse, 24 A.D.2d 322, 266 N.Y.S.2d 74 (3rd 1966); Metropolitan Life Insurance Co. v. San Francisco Bank, 58 Cal.App. 528, 136...